Kuwaitis feel the pain from the global financial crisis

KUWAIT (Reuters) - Staring at large screens displaying yet another fall in stock prices on the Kuwaiti bourse, Abou Ahmad fears his life savings have evaporated.

A Kuwaiti investor next to a computer monitor on the trading floor of the Kuwait Stock Exchange March 26, 2009. REUTERS/Stephanie McGehee

Like many Kuwaitis, he thought investing in the bourse carried little risk since the market had been rising since 2001, oil prices were soaring and countries across the world’s top energy-exporting region were booming.

“My 37 years of hard work went all in the bourse and now it has fallen,” said the state employee, his investments ruined by falling oil prices and the global downturn.

“I bought 80,000 shares when they were being sold at 960 fils a share. Now look at it, the stock is at 45 fils,” he said, sitting with fellow small investors on the ground floor of the bourse, which has shed almost 60 percent since July.

Kuwaitis may be relatively sheltered from a global crisis compared to other countries through a welfare state guaranteeing them state jobs, free education and health care. They rarely get fired at private firms that must fill quotas with nationals.

But Kuwaitis are feeling the pain as thousands poured their savings into the Arab world’s second-largest bourse or even took loans to buy stocks. Many are now demanding help, putting pressure on the government not to cut back a huge public sector.

“I took a loan for 50,000 dinars ($172,700) and put it all in the bourse, now the value of the shares I bought fell to almost 7,000 dinars,” said Abdullah al-Mutairi, 36, a father of three.

“Every month, I pay 550 dinars for rent and 600 dinars for the loan I took. I have to find another income to be able to live and provide for my family.”

Welfare states in the Gulf — which traditionally have offset a lack of political rights — have come under pressure as falling oil prices, the main source of income, threaten budgets amid contracting economies and tumbling bourses.

Kuwait stands out for its elected parliament, but the government is locked in a power struggle with the legislature that has delayed measures to reform and reinvigorate the economy.

Last week, the emir Sheikh Sabah al-Ahmad al-Sabah dissolved parliament for the second time in a year and elections are expected in May.

Government efforts to diversify the economy have made less progress than other Gulf countries, where there is less opposition capable of scuppering official plans.

STALLED REFORMS

Elections could bring in another parliament dominated by Islamists and tribal politicians who oppose plans to cut an overstaffed public sector and boost the private sector.

Since December projects worth at least $34 billion have been canceled or delayed, several after deputies voiced opposition.

“I don’t see a big change in parliament,” said Youssef Jassim, a Kuwaiti businessman, gathering with relatives and friends in his “diwaniya,” or traditional discussion salon.

Politicians are demanding a new state bailout for indebted citizens and more aid to cope with the crisis.

“The government should issue a decree to buy back citizens’ debts,” said Dhaifallah Bouramia, an Islamist deputy.

Some 30 Kuwaitis protested in front of the stock market building this week, demanding the government to approve the multi-billion-dollar rescue bill by emergency decree which was eventually passed on Thursday.

The global downturn has hit Kuwait badly as investment firms, which make up half of the country’s listed firms, have been investing abroad and suffer from the financial crisis.

In addition, the economy depends much on oil whose prices have fallen by two-third since the summer. Kuwait’s energy sector contributes to more than 40 percent of the gross domestic product (GDP) compared to 3 percent in Dubai, a member of the United Arab Emirates.

The government stepped in last year to save a major lender and its biggest investment bank defaulted on most of its debt.

In a rare move, Moody’s Investors Service has warned it might cut Kuwait’s rating for the first time since the political crisis is threatening its ability to tackle the economy.

“In all other countries, governments have increased budgets and spent more on developmental projects, but in Kuwait it’s the other way around, they cut projects,” said Youssef’s brother Jassem.